Mass confusion

I read an article recently where the writer was insisting that "peak oil" was pure fantasy and that peak oil theorists (such as me) were only casting doubt and confusion which is hindering a potential economic recovery.

Whilst I do believe that public perception of pretty much anything, from climate change to water shortages has a huge influence, it has to be said, that questioning any theory is imperative. Not only to gain more knowledge and the truth as it were, but also to continue the debate and keep it at the top of the agenda when it comes to potential policy making at Government level.

However, we have to beware of confusion.

Confusion within the peak oil theory is wide ranging, but the most obvious is that of "oil running out". No peak oil proponent worth their salt would ever say that oil is "running out" that would be complete nonsense. Aside from anything else, oil we use today was created millions of years ago, and it is still being created somewhere deep underground as we speak, so it will always be around. We could never extract every single drop that would be impossible. It would be like trying to get that very last drop of cola from the bottom of a cup; no matter how much you suck, there will always be a bit left.

Confusion also exists when some people think of oil. The majority of us if asked about how we use oil, we would say for our cars. This is understandable as it's our most direct contact with oil, and it's how most people think, however let's get this into perspective.

Oil is involved in every single aspect of our everyday lives if you live in the "developed, "first" or "Western" world. The shirt on your back, to the paint on your walls, to the food in your belly, if you look around as you read this, you will not see a single thing that at some point hasn't been processed in some way or created by oil.

Even the water from the tap gets there via pumps run on electricity, created at coal power stations, with coal mined, processed and delivered by oil. The floor beneath your feet whether wood, concrete, tiles etc has been processed by oil.

So, to get back to our journalist friend, there is a confusion that oil affects us directly, only if we put it in our cars, when the truth is, that oil is involved in every aspect of everything.

The end of oil age is not the end of oil, but the end of "cheap oil". If oil becomes rare, and more expensive to extract, then the cost of it will rise. By how much no-one really knows, but as a simple example, think back to those Christmas shopping days when rare toys that every child wants are being sold at extortionate prices. When any supplier has a product that everyone wants, the price goes up. The thing with oil is that unlike the child's toy, we cannot survive without it. With expensive oil, comes expensive lorry trips, which means that costs have to be borne by the food on the supermarket shelf. How far away is the day when the loaf you buy costs more to ship to the store, than the loaf itself?

Well actually the answer to this is even more painful. Not only would it be more expensive to ship to the supermarket, but it would also be more expensive to grow, process and then ship. In fact, let's take a loaf of bread, and see how much it depends on oil before we finally have it in our belly.

For the purpose of simplicity, we'll avoid the other ingredients such as yeast, water, salt etc, and concentrate on the basics; the corn.

We plough the field > oil based tractor
We plant the corn > oil based tractor
We water the seed> oil based or electricity powered pumps
We fertilise the corn > oil based tractor/natural gas based fertiliser
We reap the corn > oil based combine
We transport the corn to silo's > oil based lorry
We dry the corn in silo's > Oil/gas based heaters
We ship the corn to a mill > oil based lorries
We turn corn into flour > oil/electric mill
We bag the flour, then ship it to bakery > oil based lorry
We bake the bread > oil/gas/electric machinery/ovens
We package the bread > oil based plastic bags
We load onto pallets, then onto lorries > oil/electric based forklifts
We ship to wholesaler > oil based lorry OR
We ship to straight to supermarket > oil based lorry
Unloaded by hand and stacked on the shelves > no oil energy, just human energy.
Consumer arrives at store > oil based vehicle (usually car/bus/train)
Bread purchased, packed in plastic bag (usually) > oil based plastic bags
Consumer journey's home > oil based vehicle (usually car/bus/train)
Consumer eats bread.

Is that the end? Unfortunately not.

Customer throws away plastic bag
Refuse vehicle collects bag > oil based vehicle
Tips refuse into landfill
Landfill vehicles move refuse around > oil based vehicle
Landfill finally full, covered in topsoil > oil based vehicle


Remove cheap oil out of that process and you have an extremely expensive loaf of bread. Take oil out of ALL of the process and that bread is almost priceless. The reason for this is because the processes still need to be completed, so the job will have to be done by human energy and that is more expensive than any other energy we have at our disposal.

To make this point, we only have to look at the initial step in the process, the ploughing and sowing of the seed. To grow the acreage of corn that we need today would take thousands of human beings using animals, and all that would take wages; billions of dollars worth!

As a statistic, a single barrel of oil (approx. $70 @ 14/7/10) contains the equivalent of 21,000 man hours of energy. That means that for human energy to compete with oil energy, human beings would need to work for $0.003 per hour. That's a third of a cent per hour!

I do hope you begin to understand the value of cheap oil and how we have no chance of ever matching it.

The problem of course, when cheap oil is in the past, is twofold. Firstly, if you have a barrel of expensive, hard to get oil, do you grow corn for food, or make plastic pumpkins for hallow e'en?
Secondly, how do you allocate that cheap oil? Is it right that some will starve because of higher food prices, and yet a celebrity can still buy a $30,000 handbag which has been made and shipped from China?

Any sensible reader will understand that the only losers will be those at the bottom end of the social spectrum, this will never change, despite all the will of the world. The people at the bottom will suffer more and more as the value of food increases. In fact, as time goes on, those with generous middle incomes will also join the poor in the struggle for food, there can be no doubt about that. The higher the cost, the more people will be in food poverty.

So the journalist I mentioned at the beginning of this article needs to think very carefully about what they are saying. Even a very slight decrease in the amount of oil we extract have will affect the prices of the most basic of goods, not just the fuel at the forecourt. This is a very short sighted view and despite being popular (because the writer is telling people what they want to hear; that everything is fine and the sky isn't falling), it is also patronising.

The question you need to ask is always the same:

Are we producing enough oil to meet demand?

At the moment, it is possible that we are, but there are a number of official institutions that are beginning to publish data suggesting we aren't or we won't in the very near future:

Joint Operating Environment (US Military review on energy security)

OPEC: Peak Oil Is Near.

Peak Oil will hinder world's development

International Energy Agency (IEA) Supplies are running out fast.

UK Official Parliamentary Panel on Peak Oil


I hope that gives a good perspective on how important cheap oil is to our Western way of life. It has to be said that over 1 billion people on the planet live as they did before the age of oil, so oil to them has never been and probably won't be an issue. Estimates on world population also suggest that there has been 115 billion people on Earth in it's entire history. This is an amazing statistic because if correct, that means that 6% of the entire human population of the planet is still alive today!

Of course as population increases, the need for our bread increases too, so we will need more and more cheap oil in the future.

Best regards.

Kieran.